Sanyu Sony started a new business and completed these transactions during December. December 1 Sanyu Sony transferred $66,000 cash from a personal savings account to a checking account in the name of Sony Electric. December 2 The company paid $1,500 cash for the December rent. December 3 The company purchased $13,400 of electrical equipment by paying $5,200 cash and agreeing to pay the $8,200 balance in 30 days. December 5 The company purchased supplies by paying $900 cash. December 6 The company completed electrical work and immediately collected $1,600 cash for these services. December 8 The company purchased $2,950 of office equipment on credit. December 15 The company completed electrical work on credit in the amount of $5,900. December 18 The company purchased $500 of supplies on credit. December 20 The company paid $2,950 cash for the office equipment purchased on December 8. December 24 The company billed a client $1,000 for electrical work completed; the balance is due in 30 days. December 28 The company received $5,900 cash for the work completed on December 15. December 29 The company paid the assistant’s salary of $1,700 cash for this month. December 30 The company paid $560 cash for this month’s utility bill. December 31 Sanyu Sony withdrew $910 cash from the company for personal use. 2-a. Prepare the income statement for the current month. 2-b. Prepare the statement of owner's equity for the current month. 2-c. Prepare the balance sheet as of the end of the month. 3. Prepare the statement of cash flows for the current month.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Sanyu Sony started a new business and completed these transactions during December.
| December 1 | Sanyu Sony transferred $66,000 cash from a personal savings account to a checking account in the name of Sony Electric. |
|---|---|
| December 2 | The company paid $1,500 cash for the December rent. |
| December 3 | The company purchased $13,400 of electrical equipment by paying $5,200 cash and agreeing to pay the $8,200 balance in 30 days. |
| December 5 | The company purchased supplies by paying $900 cash. |
| December 6 | The company completed electrical work and immediately collected $1,600 cash for these services. |
| December 8 | The company purchased $2,950 of office equipment on credit. |
| December 15 | The company completed electrical work on credit in the amount of $5,900. |
| December 18 | The company purchased $500 of supplies on credit. |
| December 20 | The company paid $2,950 cash for the office equipment purchased on December 8. |
| December 24 | The company billed a client $1,000 for electrical work completed; the balance is due in 30 days. |
| December 28 | The company received $5,900 cash for the work completed on December 15. |
| December 29 | The company paid the assistant’s salary of $1,700 cash for this month. |
| December 30 | The company paid $560 cash for this month’s utility bill. |
| December 31 | Sanyu Sony withdrew $910 cash from the company for personal use. |
2-a. Prepare the income statement for the current month.
2-b. Prepare the statement of owner's equity for the current month.
2-c. Prepare the
3. Prepare the statement of
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